Retirement planning involves making complex decisions in the face of continual uncertainty. We find it incredibly hard to admit we’re on the wrong track and change direction. When we make a decision and things don’t work out as planned we tend to make excuses. We tend to avoid questioning our previous decisions, especially if we’ve invested time and effort arriving at them. So we look for ways to justify our original decisions. If we do recognise that things have gone wrong, we often get demoralised and give up trying.

Objective retirement planning (or any type of planning for that matter) means not being discouraged by past mistakes or mishaps. It also means not blindly continuing as though nothing’s changed. Say you’ve just lost £10,000 after a poor investment decision. It’s human to want to recoup your losses as quickly as possible. But it’s not objective. The objective approach is to invest according to market conditions today. Today is the first day of the rest of your life.

Confirmation Bias

Psychologists call the tendency to question our past decisions “confirmation bias”. We ignore compelling evidence that we need to revisit our earlier decisions. For example, suppose our retirement planning looks good on paper. Then suddenly we learn that economists have revised the long-term outlook for inflation; they forecast it to be much higher than we’d planned for. What do we do? A human reaction is to consider that experts often get things wrong; the experts might change their outlook again soon; so let’s ride it out and continue as normal. This approach might pay off, but it may well lead to problems in the future.

Ask an expert

Most of us don’t have the time or the inclination to become experts in retirement planning. So some of us pay good money to financial advisers and planners to guide us. But experts are only human, and they’re also prone to confirmation bias. So is consulting an expert a waste of money? Not if the expert is aware of their biases; many use sophisticated tools that enable them to question or validate their biases. The best financial planners have a good grasp of psychology; they treat the human element as just as important as number-crunching.

Retirement planning online

Finding a good retirement planner is enormously valuable, and often worth paying for. Sometimes though, we want to explore ideas on our own without paying for the privilege. Attempting to cater for this, there are numerous websites with retirement planning calculators. Unlike humans, machines don’t suffer from confirmation bias. But of course they can sometimes have biases that their creators have built in.

The vast majority of online retirement planning calculators are simplistic, leading to misleading results. Some typical drawbacks include:

  • Over-simplified inputs.
  • Not taking into account your entire net worth.
  • Catering only for a single individual, not a couple.
  • Ignoring inflation.
  • No allowance for market uncertainty, using purely straight-line projections.
  • No allowance for longevity uncertainty, so you need to guess how long your money will need to last.
  • Only catering for those already in retirement.
  • Inflexible built-in assumptions.
  • Focusing on only one aspect of retirement planning (e.g. drawdown).
  • Reliance on trial and error to find a sustainable strategy.

The retirement planning calculator with a difference

Some online retirement planning calculators are better than others. But EvolveMyRetirement® is the only one that avoids all of the above drawbacks. If you let it generate your optimised strategy, it will be free of confirmation bias. If market conditions change for the worse, it will objectively adjust its results to them, just as a Sat Nav calmly finds a new route if you make a wrong turn. Many users (myself included) have found that EvolveMyRetirement® helps us question our own assumptions and biases.

Retirement Planning: Today’s The First Day Of The Rest Of Your Life

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